Business opportunities in the leisure goods and activities industry - Essay Example

Business Opportunities in the Leisure Goods and Activities Industry Introduction According to Business Link (n.d recreation, leisure goods and services is one of the sectors with the fastest level of growth in the UK. However, Business Link (n.d) further points out that spending on recreation and leisure is discretionary, varying in line with disposable income, and that the sector responds quickly to recessionary pressures. It is for this reason that expenditure in the industry is highest where consumers are able to devote time and money to leisure activities and goods. Business Link (n.d.) also indicates that the key drivers for this sector include: inexpensive air travel; the aspirations for higher lifestyle and increasing disposable incomes Increasing opportunities in countries experiencing increases in disposable incomes but where the sector is still in the developmental stages, for example Eastern Europe. This industry has the ability to increase employment, attract revenue and therefore drive domestic development in the UK (Business Link n.d.). Analysis of Data The information in the table below shows the details of seven sectors and their contribution to the total expenditure in the industry over the six year period – 2002 to 2007. Expenditure 2002 2003 2004 2005 2006 2007   £m £m £m £m £m £m Family outings and holidays             Holiday (domestic and overseas) 26,729 28,707 30,642 31816 32939 35005 Theme Parks 250 270 257 265 274 259 Experience days out 77 85 92 90 98 104 Total 27,056 29,062 30,991 32,171 33,311 35,368 Food and drink             Eating out 24070 25250 26510 28120 29590 30450 Pubs 24000 24400 24700 25000 25500 26000 Total 48070 49650 51210 53120 55090 56450 Sport             Sports participation 3578 3483 3629 3759 3993 4250 Health & fitness clubs 1799 1934 2044 2110 2266 2496 Fitness classes 673 721 764 809 858 917 Total 6050 6138 6437 6678 7117 7663 Culture             Books 3158 3200 3303 3282 3381 3450 Pre-recorded music single and album sales 1186 1177 1157 1113 1076 1043 Theatre 328 321 344 384 396 425 Total 4672 4698 4804 4779 4853 4918 Gambling/Gaming             Gambling 8125 6947 7724 9389 9388 9370 Spectator sports 801 809 831 889 924 963 Tenpin bowling 245 255 260 265 273 281 Total 9171 8011 8815 10543 10585 10614 Household activities             DIY 9544 10058 10580 10347 10106 10804 Garden Products 5650 5890 5410 5180 5150 5140 Total 15194 15948 15990 15527 15256 15944 Entertainment             Pre-recorded video and DVD sales and rentals 2372 2694 2939 2716 2501 2456 Video and computer games 1638 1615 1551 1783 1897 2402 Nightclubs 1773 1682 1798 1830 1835 1993 Cinema 1049 1045 1077 1078 1082 1163 Total 6832 7036 7365 7407 7315 8014 Grand Total 117,045 120,543 125,612 130,225 133,527 138,971 Table 1 – Expenditure in the Leisure and Activities Industry 2002 to 2007 Source: Table 1 above indicates that the total expenditure increased every year over the six year period. However, the percentage increase varied. The total expenditure increased by 3% in 2003, 4.2% in 2004, 3.7% in 2005, 2.5% in 2006, and 4.1% in 2007. The food and drink the sector with the highest expenditure accounting for 41% of the total expenditure in 2002 and 2007. This sector was followed by family outings and holidays with 23% in 2002 and 25% in 2007. The culture sector was the sector with the lowest expenditure showing a mere 4% in 2002 and falling to 3.5% in 2007. Of the seven sectors the culture, gambling/gaming, household activities and entertainment were the ones showing reduction in any year. However, overall all sectors showed increases over the period. The three sectors that appears promising from the figures in the table are the Food and drink, Family outings and holidays, and sport. However, a further analysis may provide more information. The table below shows the sectors and how each category within each sector performed over the period. Expenditure 2002 Change (%) 2003 Change (%) 2004 Change (%) 2005 Change (%) 2006 Change (%) 2007   £m   £m   £m   £m   £m   £m Family outings and holidays                       Holiday (domestic and overseas) 26,729 7.40% 28,707 6.74% 30,642 3.83% 31816 3.53% 32939 6.27% 35005 Theme Parks 250 8.00% 270 -4.81% 257 3.11% 265 3.40% 274 -5.47% 259 Experience days out 77 10.39% 85 8.24% 92 -2.17% 90 8.89% 98 6.12% 104                         Food and drink                       Eating out 24070 4.90% 25250 4.99% 26510 6.07% 28120 5.23% 29590 2.91% 30450 Pubs 24000 1.67% 24400 1.23% 24700 1.21% 25000 2.00% 25500 1.96% 26000                         Sport                       Sports participation 3578 -2.66% 3483 4.19% 3629 3.58% 3759 6.23% 3993 6.44% 4250 Health & fitness clubs 1799 7.50% 1934 5.69% 2044 3.23% 2110 7.39% 2266 10.15% 2496 Fitness classes 673 7.13% 721 5.96% 764 5.89% 809 6.06% 858 6.88% 917                         Culture                       Books 3158 1.33% 3200 3.22% 3303 -0.64% 3282 3.02% 3381 2.04% 3450 Pre-recorded music single and album sales 1186 -0.76% 1177 -1.70% 1157 -3.80% 1113 -3.32% 1076 -3.07% 1043 Theatre 328 -2.13% 321 7.17% 344 11.63% 384 3.13% 396 7.32% 425                         Gambling/Gaming                       Gambling 8125 -14.50% 6947 11.18% 7724 21.56% 9389 -0.01% 9388 -0.19% 9370 Spectator sports 801 1.00% 809 2.72% 831 6.98% 889 3.94% 924 4.22% 963 Tenpin bowling 245 4.08% 255 1.96% 260 1.92% 265 3.02% 273 2.93% 281                         Household activities                       DIY 9544 5.39% 10058 5.19% 10580 -2.20% 10347 -2.33% 10106 6.91% 10804 Garden Products 5650 4.25% 5890 -8.15% 5410 -4.25% 5180 -0.58% 5150 -0.19% 5140                         Entertainment                       Pre-recorded video and DVD sales and rentals 2372 13.58% 2694 9.09% 2939 -7.59% 2716 -7.92% 2501 -1.80% 2456 Video and computer games 1638 -1.40% 1615 -3.96% 1551 14.96% 1783 6.39% 1897 26.62% 2402 Nightclubs 1773 -5.13% 1682 6.90% 1798 1.78% 1830 0.27% 1835 8.61% 1993 Cinema 1049 -0.38% 1045 3.06% 1077 0.09% 1078 0.37% 1082 7.49% 1163 Table 3 – Percentage Changes in Expenditure in the Leisure Goods and Activities Industry for the period 2002 to 2007 Table 2 indicates that within the “family outings and holidays” sector theme parks and experience days out registered declines in expenditure while holiday did not. The food and drink category showed increases in expenditure in both eating out and pubs which showed increases of between 1.2 and 6%. In the sport sector sports and participation was the only activity which registered a decline in 2003 of 2.7%. Since then it has increased every year from a low of 3.5 to a high of 6.4%. The graphs below clearly illustrate the changes for in all the sectors. Figure 1 The graph represented in Figure 1 shows that the most significant activity in this sector was holiday and that it increased every year. The others are relatively insignificant. Figure 2 Figure 2 indicates that both eating out and pubs are popular and activities that people engage in frequently. Both activities contribute significantly with “eating out” gaining the edge. Figure 3 Figure 3 shows that even though sports and participation is the only category within the sport sector that showed a decline, it contributes significantly to the expenditure in this group. The other two categories health and fitness clubs and fitness classes showed increases over the period but are relatively small when compared to sports and participation. Figure 4 The graph shows the ups and downs in this category and implies that expenditure in this area is not consistent. Figure 5 The sector shows ups and downs in all categories with gambling showing the greatest share of the expenditure. Figure 6 This category shows a lot of ups and downs in total expenditure. The DIY category shows the greatest expenditure in this sector. Figure 7 This sector seems to be the most unstable of all sectors with swings between the categories in terms of their relative proportion of the total expenditure for the sector. Conclusion and Recommendations The data so far indicates that the Food and Drink category has the greatest potential followed by the, family outings and holiday (the holiday category), and the sport sector. However, this does not mean that AGPO Limited’s business will follow the same trend as the sector. In every sector there will be some businesses that perform poorly and some that perform well above the industry average. URS Corporation Ltd (2007) indicates that London is a major market for both food and drink while Agri-Food Trade Service (2006) indicates that the total potential market in London alone is 7.5 million people. Agri-Food Trade Service (2006) also indicates that price is not a motivator to UK customers and so the mid-range segment of the market should be very attractive for new investors. In terms of the holiday market Robertson (2008) indicates that travel agents who have taken on domestic tourism as part of their business are finding that it is helping them to increase their overall business potential. One travel agent indicated that the older market has been successful for their business and that it is getting better as time goes by. Another travel company has indicated that London, York and Edinburgh are the most popular cities for short trips by train in the domestic travel segment (Robertson 2008). The sport sector is one of the smallest but it has a lot of potential with people becoming health and fitness conscious. According to Marshall (2010) the craze for fitness equipment is set to increase substantially as people are becoming more concerned about their physical appearance and the rising health cost. Therefore, staying fit and healthy is the ‘in thing’ these days. I recommend these three leisure goods and activities as they show the strongest potential and they are not affected in any major way by recessionary pressures. Foreign travel when affected is easily substituted by domestic travel which has shown great strides as pointed out by Robertson (2008). References Agri-Food Trade Service. (2006). Agri-Food Consumer Profile: United Kingdom. http://www.ats.agr.gc.ca/eur/3859-eng.htm. Last accessed 4th Aug 2011 Business Link. (n.d.). Recreation and Leisure Goods and Services. Retrieved from: http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1077958956&type=RESOURCES. Last accessed 4th Aug 2011. Marshall, J (2010). Fitness Equipment – Make Your Exercise Enjoyable. Retrieved from: http://ezinearticles.com/?expert=Jacob_Marshal. Last accessed 5th Aug 2011 Robertson, E. (2008). Analysis: Travel Agents and the UK holiday market. Retrieved from: http://www.travelweekly.co.uk/Articles/2008/03/06/26885/analysis-travel-agents-and-the-uk-holiday-market.html. Last accessed 5th Aug 2011 USR Corporation Ltd. (2007) London Wholesale Market Review. Retrieved: http://legacy.london.gov.uk/mayor/planning/industrial-land/docs/il-wholesale-markets-review.rtf. Last accessed 4th Aug 2011 Read More